Keynote Address on "Development of the Digital Industry in Latin America" at ECLAC/CEPAL Workshop

Remarks
Ambassador Daniel A. Sepulveda
Deputy Assistant Secretary and U.S. Coordinator for International Communications and Information Policy, Bureau of Economic and Business Affairs
Santiago, Chile
May 18, 2016


As prepared

Thank you for inviting me to speak to you today. The future of the Internet and the digital economy in Latin America is critical to our hemispheric economic future and our joint ability to lead the world in this critical space as I believe we have done in multiple venues over the last few years from NetMundial to WSIS+10 review negotiations.

CEPAL has proven itself open to an inclusive and thoughtful dialogue with all stakeholders on digital economy issues. I was impressed with your gathering in Mexico last year and we appreciate the opportunity to participate here today as well.

The United States believes that the digital economy is the backbone of the modern economy. We believe that is true for every sector, from manufacturers relying on communications for managing supply chains, to companies connecting with customers, to producers analyzing data and creating new markets.

As policymakers, ensuring that we develop the right legal and regulatory environment for the digital economy to flourish throughout the Americas is absolutely critical to realizing the full benefit of ICTs for our societies and I know it is a goal that we all share.

We have all read the studies that indicate that a 10 percent increase in broadband penetration is estimated to result in approximately a 1.4 percent increase in GDP, so the potential is huge; however, the growth and promise that we know the internet can deliver is not a foregone conclusion, nor will it reach those in low income or rural communities without public-private partnerships. And the companies that want to deploy and use ICTs in the region will not be able to do so without welcoming policy regimes.

Within that context, I believe that one of the policy discussion you will be having here and in other venues is in regard to the debate over the proper relationship between broadband internet service providers and “over the top” or OTT service providers and what mix of policies creates an enabling environment for innovation and network deployment.

We have had this debate at home for years and decided that the open internet as a platform for innovation with relatively little friction or barriers to entry and participation is the best way to enable the digital economy to grow. But it is a debatable proposition and we will further engage as a community on this issue at upcoming events in Mexico, including at the June OECD Ministerial Meeting on the Digital Economy in Cancun and at the Internet Governance Forum in December in Guadalajara.

The underlying questions in the debate over whether or not to regulate OTT providers in the same way we regulate the owners of infrastructure who both provide access to the Internet and services delivered over their infrastructure are fundamentally about fairness and the effects and incentives regulatory action or inaction create for market actors and what those actions mean for consumers, content creators, and innovation.

We do not see it as the role of any single actor, public or private, to pick winners and losers in a competitive marketplace. And we would be very careful to change or manipulate the digital ecosystem through regulation that has enabled the creation of the digital economy and the development and deployment of the internet and internet enabled services. In that ecosystem, regulation is light, innovation flourishes without requiring special access to consumers, and networks are open to edge providers of services.

We do not support a role for any regulator or single market actor to limit people’s right to use internet access to freely express themselves, to communicate with others, or to deliver innovative services from the edge of the networks. There is a distinction between the provision of internet access and the content and services delivered over the internet, which is what people generally think of as the internet. We particularly remain steadfast in opposing regulation of that content or services through international multilateral bodies like the ITU or through centralized regulation.

I know that there are important discussions here in the region on net neutrality and we have had multiple developments in that area in the US over the last few years. There are now more than 40 jurisdictions around the world with some version of net neutrality law or regulation. And it was a subject of discussion and deliberation at the WSIS +10 review at the UN last December.

The fight for network neutrality, like the fight for an open and free internet, has won significant support among the world’s internet users and content creators. Agree or disagree with the principle and its protection through law and regulation, one has to recognize that it has captured the loyalty of activists who love what the Internet has enabled and that cannot be ignored. It is a democratic expression of a global commitment to a free and open Internet.

But the commitment to the open Internet and the promotion of networks that enable full and nondiscriminatory access to the internet do not answer all OTT related questions.

Content and service providers will continue to adapt their offerings within the constraints or freedoms that technology and law allow for them to meet consumer demand, forming new partnerships and developing new capabilities as the media consumption patterns and enabling technologies continue to evolve. If businesses based on pre-existing models wish to continue to succeed, they will need to adjust to the changing realities of the marketplace. We see that happening through new and creative offerings by infrastructure owners and OTT providers alike, ranging from stand-alone video services to new streaming options to the evolution of traditional packages of content delivered over multichannel video subscriptions.

From our perspective, regardless of the regulatory frame governing OTT and broadband internet service providers or the differences of opinion we may have across jurisdiction on the freedom that people should have when accessing the internet, our first mission as outlined in the original WSIS is to connect the world.

To help in that effort, the Department of State has launched the Global Connect Initiative (GCI), with the goal of enabling an additional 1.5 billion people to become Internet users by 2020 by better coordinating existing programs to bridge the digital divide, targeting nations that want and need the help, and bringing new actors into the effort, including the development community and international development banks.

Beyond connectivity, one of the guiding principles of the GCI is a recognition of the need to foster digital literacy, enable and promote the development of locally relevant content, applications, and services as they are essential to widespread adoption of the Internet and increase its social and economic value to people, families, and communities.

This effort is as or more important in Latin America than anywhere else in the world. And you are critical to its fulfillment. Latin America’s telecom sector is one of the world’s fastest growing, and the strong demand for mobile data, along with the expansion of 4G-LTE and 3G networks, has driven a strong push towards consolidation of smaller actors as well as the introduction of new, large players into specific markets, notably in Brazil and Mexico, two markets we follow closely.

Consolidation can accelerate the pace of growth and increase network capacity, allowing providers to offer converged and bundled services and products to meet further consumer demand. Consumers can benefit from product bundles through emerging services, unified billing, and potential discounts.

It is important to note, however, that competition in some markets may be reduced if non-merged competitors cannot replicate bundles exclusive to merged competitors such as premium television content included in a bundle. To be competitive, firms must invest in a solid infrastructure base and be able to provide competitively priced service bundles to consumers, while expanding their range of supported business services (B2B, B2G, M2M, and IoT).

Big is not by definition bad, but regulators have the responsibility of ensuring that consolidation does not lead to consumer harm. They have multiple tools to provide that protection and should be encouraged to exercise them.

As public servants, our aim is to encourage the healthiest environment for the creation and delivery of communications services as possible. We strive to ensure that all actors are treated fairly. Our duty is to consumers, entrepreneurs, and the public interest. None of us if infallible and many of the decisions we make are subject to honorable debate and discourse. It is in venues like this one and others where the discussion will continue for years to come. And if we engage that conversation with open minds and mutual respect, we can and will find the right balance.

Over the last few years, I have had the opportunity to study and work in the region. Countries such as Colombia recognized the importance of increased connectivity early on. In 2010, President Santos and then-ICT Minister, Diego Molano, spearheaded Plan Vive Digital to promote broadband connectivity throughout Colombia particularly in the remote and underserved areas. They recognized the economic and societal benefits that the internet and its services can bring to the rural population. To expand on progress made, Colombia renewed Plan Vive Digital in 2014 for four more years.

Now we see Argentina under President Macri’s new administration working on how to best open up the telecommunications and ICT sector there, both to encourage foreign investment and to extend the benefits of ICTs to its rural population. We will be sending a team, including the Federal Communications Commission and Commerce’s Commercial Law Development Program under our Technology Leadership Program (TLP), to Buenos Aires in early June to begin the discussion with the Ministry of Communications and offer our assistance. Chairman Wheeler and I expect to then meet with Argentine officials later in the summer.

And Cuba provides us with another interesting case study. I have seen firsthand through our discussions in Havana with the Ministry of Communications and ETECSA, the Cuba telecommunications operator, their interest in increased telecommunications infrastructure and services deployment throughout their country. The technical staff and agencies completely understand the economic benefits, but it will be up to the political leadership to make the ultimate decisions as to how far and how fast Cuba improves its telecom and ICT sector. We will continue to encourage the Government of Cuba to work with us and the rest of you in the region to connect their people to the Internet now while interest in Cuba remains high.

The internet has served us well as a platform to provide anyone connected to it with an opportunity to contribute to political, economic, and social discourse. The creativity and innovation that has generated is furthering the global public good. Preserving its openness and encouraging its continued growth is an honorable effort and one on which our hemisphere can and should unite.

I appreciate your time and look forward to discussing with you how the United States, other countries, the development banks, and the private sector can work together to strengthen the digital economy, extend the benefits to the rest of the world, and preserve the internet as we know it for the future.

I am happy to take any questions that you might have.